Credit Rating
Getting Car Financing When You’ve Got Bad or No Credit
Need to get approved for a car loan despite a less-than-perfect past? A car is a necessity for the vast majority of people nowadays. Not everyone lives in a metropolitan area that has public transit. If you’ve got poor or no credit, a car loan may not seem so easy to get. Car loans can be huge. Car loans can have big interest. And not making your payments on time will result in big trouble for you both now and down the road. So, what can you do when you NEED a car and have credit problems. Read on:
High Risk Car Loans
There are high-risk car loans places that will finance cars to people with poor credit, no credit, people who are self-employed, bankrupt, or have had a reposession of a car in their past. Be prepared for higher costs and some other factors as well.
Interest Rates
People with solid credit can often be approved at 0-10% financing. The better qualified you are, the lower your interest rate will be because for the car dealership, it’s all about risk management. Low risk can equal low interest. High risk can mean anywhere up to 30% interest rates. Shop carefully before you sign on a dotted line and overpay for a car!
Down Payments
If you’ve got great credit, a down payment is typically not an issue. In some cases, car dealerships are even willing to let you drive away with $0 down. If, however, your credit history is less than stellar, you can expect to have to pay from a few payments to 1/3++ of the cost of the vehicle. Worried you won’t get approved for car financing? The answer is almost always a sizeable down payment. Yes, a co-signor can help but walking in with a wad of cash is most often the ticket to getting approved.
Admin Fees
Some places that finance bad credit auto loans will also charge additional fees. Be sure you’re aware of what you’re signing up for. The fees could be worthwhile for you but do shop around.
Credit Boosting
A great way to boost your credit is to make payments on time to a car financing company that reports to credit bureaus. Do be sure you can afford to make payments because that monthly report could boost your credit score. On the flip side, you don’t want to go from bad to worse by over-extending yourself.
Beware of *Bad* Bad Credit Car Loans
Some bad credit finance scenarios are severely over-priced. Be sure you’re getting a sound vehicle that will outlast the payment plan! Don’t be tempted to take a car you truly can’t afford, in the hopes you’ll get through things “some how”. Make sure you’re at a comfort level with your budget that allows you to drive, buy food, pay bills, keep the car insured, and put gas in it.
If you’re buying a vehicle as a way to improve your credit score, be sure you deal with a financing company that DOES report your on-time payments. Not all private financiers take the time to do this. If self employed, car loans may not seem easy to get but produce proof of your income (and probably your last few years of tax returns / assessments) and produce a sizeable down payment and you could get the approval you seek.
A car could be useful for you, it could even be essential for you. You do have buying power, even without a perfect credit history so shop around, read the fine-print, be sure you’re buying into a good deal, and use cash to leverage yourself.
What Can You Do To Repair Your Credit And Boost Your Credit Score?
Credit repair is something that can make a big difference for you. There are a lot of things you can do to improve your bad credit report so that you appear to be not only credit-worthy but worthy of a promotion or worthy to a potential soul mate. Yes, even your love life could be impacted by your credit history.
Because credit is such an important factor to people today in terms of their ability to reach their goals, a lot of people now talk about credit history when they are building a relationship. Your poor history could make you less than attractive to a person you are interested in building a future with because it could hamper their goals and plans.
Note: Time doesn’t really heal all credit wounds. Even if you’ve laid low long enough that seven years has passed, you still need a good credit score.
Here are some credit score boosting tips to help:
- A secured / pre-paid credit card. You pay the credit card company a deposit (they usually keep the interest) and you pay fees to use it as a normal credit card. They report to credit bureaus that you pay your bills on time. You can get two or three types of prepaid credit cards in Canada, for instance. Consider Home Trust Secured Visa and Capital One Guaranteed Mastercard, for help. (Note: Debit cards or pre-paid credit cards typically do not report to credit reporting agencies.
- Check your credit history with TransAmerica and Equifax to ensure that there are no errors. You can also work to negotiate with bad debt lenders listed to pay off your debts. Some will agree to update the file once you’ve paid off your outstanding balance.
- A car loan can help. Only do this if you aren’t out of your depth with your finances (i.e: you are solvent) and if you buy a car you can afford. Car financing companies will often approve bad credit car loans but generally with a high interest rate and often a sizeable deposit will be required. If you shop around for a good deal and stick to a payment you can afford, you will probably help your credit. Be sure to deal with a financing company that does take the time to report payments monthly.
- A secured loan. If you have collateral, you can often obtain a loan that you can use to boost your credit score.
Time can heal things and making payments on time will help. Do be careful you don’t sink into an abyss of debt in an effort to make your credit report look better. Consider living on a cash budget such as with the money jar budget and be sure to use credit wisely.
How to Fix Your Lousy Credit Rating
Having a poor credit rating can be debilitating because it can impact your plans. Maybe you’re at a point now where you can be responsible about your credit and want to buy a house, buy a car, and look good on paper. A lot of people make mistakes with their credit and go on to later on buy a house, a car, and improve their credit rating substantially.
How do you fix your bad credit?
It used to be a matter of getting your credit score and manually fixing all your old mistakes and then just waiting for them to disappear because enough time had passed. You used to be able to wipe the slate clean after 7 years. But today it can also be about your credit score as well as your credit history that impacts your ability. Even once your bad debts are paid off and your file is empty, new lenders will look at your score and how many inquiries are on your account when they consider approving or declining your credit application.
Even if all your old mistakes are in the past, you might need a decent credit score to get ahead.
Tips for Rebuilding Your Credit
- A bad credit car loan. High risk car loans will come at a high interest rate and you might need a big down payment but the regular payments can show up quickly on your credit report as positive feedback. A lot of car loan places will lend to high risk customers because the car is collateral and because they can make more profit on the transaction due to price premiums. The extra money you pay ‘may’ be worth it for building your credit
- A prepaid credit card. Pre-paid credit cards have interest rates and they hold your money (and typically keep the interest) but this is a good way to show regular payments and credit responsibility. After time has passed the company may transition you to a regular card and credit your balance (read the fine print before signing up, though!)
- A high interest loan. You can take out a high interest loan with collateral and pay it back on time. Some people simply leave the money in the bank so that it can get paid back
- Save money in a high interest savings account and get a loan using it as collateral
- Ask your creditors to take your bad reviews off. If you arrange to pay a bad debt, they might remove their bad report so use that as a bargaining chip when making payment arrangements.
After you begin to re-establish yourself, stay on target and stay on budget. Check out the money jar budget for tips about living lean and saving for the future!